The clearance certificate: what it is, and why it matters
When someone passes away, estate executors are responsible to keep seven years of the deceased tax receipts, unless a clearance certificate is obtained. Appropriate documentation is needed, and a TX19 form has to be filled out and filed. Executors, after obtaining the certificate, can distribute the assets of the deceased’s estate without worrying about owing taxes down the road. Once the beneficiaries have approved, the certificate can be used to close the estate allowing everyone to move on.
- Obtaining a clearance certificate is not required by law, but an executor risks incurring tax liability without one.
- Requesting a clearance certificate requires filing Form TX19 along with all required estate documents and may take about 6 months for processing.
- If estate assets are to be distributed before obtaining a clearance certificate, executors should reserve assets valued at two to three times any expected tax liability.
“One of an executor’s most important jobs is to obtain the clearance certificate: written confirmation from the Canada Revenue Agency that the deceased (and the deceased’s estate) has paid all taxes and associated interest and penalties up to the date the certificate is issued. “